current and coming law on ed, and you - serious enterprise development 2011
DESCRIPTION
Presented during Tshikululu Social Investments' 2011 Serious Enterprise Development workshop.How do the objectives of enterprise development under B-BBEE codes compare to those in other countries? Dr Woolley will review the basis of ED qualification under the codes; ask how a companymight engage in value-adding ED in a way that aligns with business strategy; and consider what to do, and what not to do, during the implementation of ED.TRANSCRIPT
Dr Robin Woolley082-332-9201
Introducing Enterprise development
Ticking Time-Bomb 1 – High GINI Coefficient “Gini Coefficient is a measure of statistical dispersion
developed by the Italian statistician Corrado Gini, commonly used as a measure of inequality of income or wealth. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to perfect equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to perfect inequality.
When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same percentage of the total income (G=0).”
GINI CO- EFFICIENT: Measuring inequality
B-BBEE will not succeed without growth
Source: The Brenthurst initiative 1999
The dimensions of B-BBEE – a Maslow’s view
Enterprise development
Preferential procurement
Employment equity
Company ownership
The environment
Your supply chain
Your company
On-g
oin
g
Once
off
Targets Weight
Management & control
Skills development
Socio-economic1% NPAT
3% NPAT
See overleaf
3% payroll
68%-3%
40% - 50%
25% shareholding
20%
10%
15%
20%
15%
5%
15%
Enterprise Development Contributions means: • monetary or non-monetary contributions • recoverable or non-recoverable contributions• actually initiated and implemented in favour of qualifying
beneficiary entities• with the objective of contributing to the development,
sustainability and financial and operational independence of those beneficiaries
ED Definition
Enterprise development – 1. Beneficiary exists for profit
Note: size and maturity is not a specific disqualification, But look at the definition of ED in the Codes.
Enterprise development – 2. Who qualifies
Category A EME Contributions or 50% black owned or 30% black women owned; adjusted using the Benefit Factor, multiplied by 1.25
Category B Enterprise Development Contributions adjusted using the Benefit Factor:
50% black owned or 30% black women owned; or25% black owned with a BEE Status of between Level One and Level Six
i.e. > 25% black owned is a qualifying requirement
grant and related contributions
contribution amount benefit factor
grant contribution full grant amount 100%
direct cost incurred in supporting ED
verifiable cost (including both monetary and non-monetary)
100%
discounts in addition to normal business practices supporting ED
discount amount (in addition to normal business discount)
100%
overhead costs incurred in supporting ED(including people appointed in ED)
verifiable costs (including both monetary and non-monetary)
80%
Enterprise development – 3. What qualifies
loans and related contributions
contribution amount benefit factor
interest-free loan with no security requirements supporting ED
outstanding loan amount 100%
standard loan to black owned entities with turnover of less than R 35 million supporting ED
outstanding loan amount 70%
standard loan provided to other beneficiary enterprises supporting ED
outstanding loan amount 60%
guarantees provided on behalf of a beneficiary entity supporting ED
guarantee amount 3%
lower interest rate supporting ED
outstanding loan amount prime rate – actual rate
Enterprise development – 3. What qualifies continued
other contributions contribution amount benefit factor
shorter payment periods supporting ED
percentage of invoiced amount
percentage being 15 days less the number of days from invoice to payment
Enterprise development – 3. What qualifies continued
Enterprise development – 4. Different from cost of sales
Enterprise Development best practice
• Supplier support - development
• Strategic investment – related value offerings / M & A activity
• Core vs non-core activities
• Courtship? – joint venturing
• Collaboration
• Capex
PURPOSE
POSITIONINGPRODUCTS
PROCESSES
PEOPLE PARTNERS
Excess
• Use audited financial statements• For Enterprise Development
– Obtain evidence to determine the B-BBEE Status of the beneficiary entity and qualifying category
– Obtain an independent competent person's report confirming that the beneficiaries meet the definition of "black" as defined.
– Inspect Enterprise Development Agreements to ensure that it complies with the criteria.
– Confirm that VAT is not included
ED: Verification Process
Conceptualization Process/ Concept/ opportunity development
Idea Generation
Idea Graduation
IdeaImplementation
Incubation Nexttime
1. Understanding COGP technical compliance aspects of ED
2. Understanding a value based strategic approach to ED
3. Brainstorming for “best fit ideas”
4. Idea filtering and selection
5. Mapping certainties and uncertainties (Scoping)
1. Business Model Development
2. Market Analysis: Customers and Competitors
3. Risk Assessment : structuring tax, IFRS2, legal, empowerment,
4. Financial Budgets
5. Business Plan
1. Deal Structuring
2. Financing
3. Entrepreneur / Partner selection
4. Start -up
1. Virtual Incubation: Mentorship, Coaching, BDS
2. Total Incubation
3. Networking Forums
1. Accelerated Growth Development
Phase One
Phase Two
Phase ThreePhase Four
Phase Five
Our ED map is …
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